Annual Report for year ended 30 April 2016 Gateley (Holdings) Plc Gateley (Holdings) Plc (formerly Ensco 1101 Limited) Annual report and consolidated financial statements Registered number 9310078 For the year ended 30 April 2016 Gateley (Holdings) Plc (formerly Ensco 1101 Limited) Annual report and consolidated financial statements For the year ended 30 April 2016 Contents Company information 1 Chairman’s statement 2 Chief Executive Officer’s review 3 Finance Director’s review 5 Strategic report 10 Report on remuneration: voluntary disclosure 15 Corporate governance: voluntary disclosure 19 Board of Directors 21 Directors’ report 22 Independent auditors report to the members of Gateley (Holdings) Plc (formerly Ensco 1101 Limited) 25 Consolidated statement of profit and loss and other comprehensive income 27 Consolidated statement of financial position 28 Statement of changes in equity 29 Consolidated cash flow statement 30 Notes 31 Parent company statement of financial position 60 Parent company Statement of changes in equity 61 Parent company cash flow statement 62 Parent company notes to the financial statements 63 Notice of annual general meeting 69 Gateley (Holdings) Plc (formerly Ensco 1101 Limited) Annual report and consolidated financial statements For the year ended 30 April 2016 Company information Registration number 9310078 Registered office One Eleven Edmund Street Birmingham B3 2HJ Directors MJ Ward Chief Executive Officer PG Davies Chief Operating Officer NA Smith Finance Director and Company Secretary NT Payne Non-Executive Chairman JC Lake Non-Executive Director MR Seabrook Non-Executive Director Auditor KPMG LLP One Snowhill Snow Hill Queensway Birmingham B4 6GH Nominated advisor and broker Cantor Fitzgerald Europe One Churchill Place Canary Wharf London E14 5RB Principal bankers HSBC Bank plc 6th Floor 120 Edmund Street Birmingham B3 2QZ Lloyds Bank plc 125 Colmore Row Birmingham West Midlands B3 3SF Registrars Capita Asset Services 40 Dukes Place London EC3A 7NH Financial PR adviser Buchanan 107 Cheapside London EC2V 6DN Website www.gateleyplc.com 1 Gateley (Holdings) Plc (formerly Ensco 1101 Limited) Annual report and consolidated financial statements For the year ended 30 April 2016 Chairman’s statement I am delighted with the performance of Gateley in its first year as a public company. In a legal marketplace that is continually evolving, the Group has delivered a record set of results. I congratulate our CEO Michael Ward and his team for successfully managing the transition from an LLP to a PLC. When we came to market in June 2015 the Board outlined a strategy to maximise the opportunities presented from the changing legal marketplace and to use our new and more flexible PLC structure to capitalise thereon. The growth strategy was based on three key pillars: to Differentiate (through our comprehensive service offering and service ethic), Diversify (through acquisition of additional complementary non-legal businesses in addition to organic legal service expansion through sector specialism or geographically) and finally to Incentivise (offering wider and earlier equity to staff). I believe that in the year ended 30 April 2016 through, strong organic growth, the acquisition of Gateley Capitus, the development of equity participation schemes within the business and continued strong client focus, we have delivered on our aims for the year and have begun our journey as a PLC well. These strong results, together with the successful IPO and the encouraging start the Group has made in its journey, have also helped raise our profile and enhance our brand, differentiating us from our competitors and attracting quality staff who are interested in benefiting from the opportunities provided by a structure, which we believe is far better suited to the legal landscape of today. As we continue to build further scale, breadth and depth into our business, we will maintain our disciplined approach to optimising the growth opportunities we see for the Group, whilst keeping our focus on meeting the diverse needs of our client base. The Board and senior management team have the requisite leadership, experience and desire to be able to achieve this and we continue to look forward with confidence. The Board is pleased to propose a final dividend of 3.764p per share, subject to shareholder approval at the Annual General Meeting on 21 September 2016. Nigel Payne Chairman 18 July 2016 2 Gateley (Holdings) Plc (formerly Ensco 1101 Limited) Annual report and consolidated financial statements For the year ended 30 April 2016 Chief Executive Officer’s review Introduction I am pleased to report that the Group has performed well in its first year as a public company. In a market that continues to be challenging, the Board has remained focused on the execution of our stated strategy of long-term organic and acquisitive growth. The Group has made excellent progress since our successful AIM admission, all of which has been made possible by the positive reaction to our flotation by our diversified client base and excellent staff. Financial Results In our first year as a Plc, I am pleased to report a strong trading performance with increases against last year in revenue (up 10.2%), profit before tax (up 12.2%) and adjusted EBITDA (up 13.3%). Our transition from LLP to PLC accords with our original plan and our balance sheet has strengthened as a result of the ground breaking change in business model together with another year of strong cash generation. We have invested for the long term future of the business and are pleased to propose a dividend in line with expectations. Operational Review The firm continues to perform well despite challenging market conditions as revenues from all of our five strategic business divisions, namely Banking and Financial Services; Corporate; Business Services; Employees, Pensions and Benefits; and Property grew year on year, with four of these divisions reporting double-digit growth. Whilst growth in our divisions is encouraging it is also important to highlight that the Group operates through a diverse and resilient business structure that has the ability to perform well in both good and challenging economic environments. Since 1 May 2015, we have welcomed 12 new lateral partner hires to the Group across our offices, evidencing our ability to continue to attract and retain talent. In addition, 4 senior associates have been promoted to Partner with effect from 1 May 2016. Our yearend staff numbers have increased from 606 to 638 over the 12 month reporting period from 1 May 2015. After consulting all employees, our new SAYE and CSOP schemes will be in place by September 2016. We announced the opening of a new office in Reading on 1 November 2015 and officially moved into new leasehold premises at The Blade on 1 June 2016. Current staff numbers are eight, including four partners and further recruitment is progressing well. We continue to be successful in maintaining our presence on legal panels and have been reappointed to the national legal panel for Taylor Wimpey, one of the UK's largest residential developers, for a further three years and to one of our UK clearing bank panels for a further five years. 3 Gateley (Holdings) Plc (formerly Ensco 1101 Limited) Annual report and consolidated financial statements For the year ended 30 April 2016 Chief Executive Officer’s review (continued) Acquisitions At the time of the Group’s Admission to AIM, we stated that the Group would seek to acquire businesses offering complementary professional and other specialist services to clients in Gateley’s target markets. In April 2016, we successfully completed our first acquisition of a non-legal services business, Gateley Capitus Limited (formally Capitus Limted), which is consistent with our stated growth strategy. Gateley Capitus Limited is a UK specialist tax incentives advisory business. We are pleased to report that the integration of this business is performing well. The reception from the marketplace to the enlarged offering is encouraging. We continue to explore acquisitions of further businesses providing complementary professional services to enable us to further diversify our income streams going forward. Current trading and outlook Trading in the second half of the financial year ended 30 April 2016 was robust and we are pleased to report that trading in the first two months of the current financial year has been encouraging. As highlighted above, we are confident that our business is well balanced and resilient and we remain focused on delivering another year of growth in our core services, whilst continuing to look for complementary acquisitions. Michael Ward CEO 18 July 2016 4 Gateley (Holdings) Plc (formerly Ensco 1101 Limited) Annual report and consolidated financial statements For the year ended 30 April 2016 Finance Director’s review Introduction For clarity of understanding and ease of future comparison, we have set alongside our trading results for the year to 30 April 2016, pro forma financial results, in the form of a pro forma consolidated statement of profit and loss and other income statement together with the pro forma consolidated statement of financial position for the twelve months of the prior year as if the Plc structure of the Group had been in place during that time (see pages 8 & 9). A summary of the corporate structure changes effected in order to move from an LLP to a PLC is also included below. The following commentary compares the current year results against the pro forma results for the prior year shown on page 8. Financial Highlights During the 12 months ended 30 April 2016 the Group delivered solid organic revenue growth of 10.2% with total revenues of £67.1m (pro forma 2015: £60.9m). This growth continued in line with the trend in revenue from the preceding 12 months and is ahead of that seen within our sector as a whole, demonstrating the Group’s ability to increase its market share.